Posted
by
michael
on Friday April 09, 2004 @03:32PM
from the taxing-time-of-year dept.

theodp writes "Over the next week, taxpayers in 19 states will be confronting new sections on state returns that ask them to fork over unpaid sales taxes for items purchased out of state, including Internet transactions. A NY Daily News editorial characterized the addition of use tax to state returns as a rip-off and advised taxpayers to fill in a zero on the line, although an accountant suggests doing so may even be worse than just leaving it blank and put you on the line for tax fraud."

Where is there a list of states participating in this? TFA only mentions two, and a lightweight Googling didn't reveal much more. I'm a Mass/Taxachusetts resident (so I consider the chances high), but I certainly didn't see anything on my state return about grey-area sales taxes.

Speaking of which, good luck if they wanted to collect. As the article mentioned, the honor system doesn't work. Not only that, being the organized person that I am, clearly I have kept an accurate record of every internet transaction I made in 2003. In short, the only way I can see these folks having a prayer of getting my money is by making a national system of collecting these taxes that is compulsory for retailers to take part in. Otherwise, it's doomed.

Alabama is one of them, though it doesn't apply it to only internet purchases. It applies to any thing that you bought out of state and brought back home.

That's interesting. A favorite Massachusetts activity, one that I did a lot as a kid, was hopping over the state line and going on a shopping spree in New Hampshire in the outlet stores. Makes me wonder if a nationalization of this sales tax deal will end up dinging the bottom line of online retailers. If people are cheap enough to go on a mini-vacation to dodge a 5% sales tax, certainly it might give them pause when they buy something from Amazon, and an invisible hand adds sales tax to the price where none existed before.

It's pretty common along the Washington(8+% sales tax) Oregon (no sales tax) border too. Incidentally if you live in a state that doesn't have a sales tax you are exempt from other state's sales taxes (probably true about all states, but they might come after you for the use tax if you live in a state with a salels tax). You were supposed to report the items purchased and pay the sales tax on them (mail order too). Companies are only required to collect if they have a physical presense in the state.

Yeah, that's illegal, and always has been. Every once in a while people get busted on big purchases (car purchases are pretty routinely caught, because the authorities know which dealerships are just on the other side of the border, and there's all the registration and whatnot).

IANAL either. However, I have read the Constitution in its entirety and contemplated the meanings within, something I'm convinced many of today's lawyers have not done. I have also studied and researched Constitutional issues for my personal development and university coursework.

I feel that you're overlooking a very big checks and balances system. The members of the federal Congress, though elected from states, are largely outside the sphere of influence of the state governments. I think the 2/3 vote to send an amendment to the states for ratification would likely not occur. Fortunately, there is no method in place for the Supreme Court to mandate an amendment be sent to the states.

Beyond the amendment issue, you are reasoning that because someone can get a better deal in another state on a purchase, the deprived state has a legitimate claim. That is not the case. If a state cannot attract profitable businesses or develop a solid revenue model, they have no business taking the revenue from states that encourage commerce and have taken steps to simplify their own tax systems. The "offended" states should study the open market's behavior and find out what they are doing wrong.

Also, you are assuming that every state that is drawing these sales has no sales tax. What if they merely have less of a sales tax? To paraphrase from the Constitution, "full faith and credit" should be applied to the acts of other states. So, if your citizens have already been taxed on a purchase in another state, they have fulfilled their obligation. If the state in which the purchase was made did not require sales taxes, they have also fulfilled their requirement. Therefore, their home state has no jurisdiction. Residents of states can claim states as their home, but states can not claim residents as their property (slavery by the state?) to control at whim.

References: Article IV, Section 1; Article 1, Section 10; and Article V of the Constitution of the United States

> Also, you are assuming that every state that is drawing these sales has no sales tax. What if they merely have less of a sales tax? To paraphrase from the Constitution, "full faith and credit" should be applied to the acts of other states. So, if your citizens have already been taxed on a purchase in another state, they have fulfilled their obligation.

I think you might have inspired a great idea. Think about this: It would be hard to make a case for having to pay sales tax in one state, and in the n

Alabama is one of them, though it doesn't apply it to only internet purchases. It applies to any thing that you bought out of state and brought back home.

That's how New York works. It's pretty interesting to. If you don't actually look at the instructions they provide you with a handy dandy little chart to compute the tax owed based on your income. This is supposed to cover all purchases less then a thousand dollars. But only at the end do they mention that you can put a zero in this line. I wonder how many people that skim through their taxes just paid it without even looking at what it was? Quite the cash cow for the state.

purchase property or a service which is delivered to you in New York State without payment of New York State and local tax to the seller, such as through the Internet, by catalog, from television shopping channels, or on an Indian reservation.

You may also owe state and local sales or use tax if you are a resident of New York State at the time of purchase and you purchase any of the following outside the state:

property you bring into New York State for use here;

a service performed on property outside New York State and you bring that property into New York State for use here; or

a service (such as an information service) you bring into New York State for use here.

(You may be eligible for a credit for sales or use tax paid to another state. See Instructions for Worksheets 1, 2, and 3, Column D, on page 38.) However, you are not required to pay state or local sales or use tax on any property or service that you bring into New York State which you purchased outside of the state before you became a resident of New York State.

You may owe an additional local tax if you are a resident of a locality (county or city) at the time of purchase and you:

bring property into that locality which you purchased in another locality in New York State that has a lower tax rate;

bring property into that locality on which you had a taxable service performed in another locality in New York State that has a lower tax rate; or

bring a service (such as an information service) into that locality which you purchased in another locality in New York State that has a lower tax rate.

However, you are not required to pay any additional local tax on any property or service that you bring into a locality in New York State that you purchased outside that locality before you became a resident of that locality.

So it's not just the Internet they are going after. I don't know what I'm going to do with mine (haven't filed yet). I don't think putting a zero down is a good idea -- it could be considered fraud. That said many tax professionals have told me in the past that they won't audit you unless the amount of cash they can get back is greater then the cost of the audit. It probably wouldn't be worth their time unless you buy tens of thousands of dollars worth of stuff off the 'net or in a catalog.

I'm impressed that it's 18 states doing this. I thought only New York and California pulled this sort of stuff. Guess all the budget crises probably have something to do with it?

Once a year I drive four hours to Pennsylvania to buy clothes where there is no sales tax on clothing. I pay a couple hundred in cash so there is no auditing trace.

Not only that, NYS has agents that check the plates in these out-of-state clothing outlets and they leave leaflets on the windshields pressuring citizens that they are evading sales tax. How's that for heavy handed tactics?

NYS has done a great job of taxing citizens and jobs out of the state and I am moving away once I am in a position too, because I have just become unemployed and there are no jobs here. Good riddance NYS, and to hell with your Gestapo tactics and your broken tax system!

Funnily enough, many, many Pennsylvanians drive across the border on a semi-regular to regular basis to either NJ or Delaware to take advantage of the liquor stores there. PA residents have several disadvantages:

* massive taxes, including an archaic Johnstown flood tax of 18% meant to assist in the rebuilding of a specific fairly small town several decades ago.* state-run liquor control board, which means dreadful selections and surly clerks. Just try ordering something that the local store doesn't carry.

Yeah, this is true, and I would have modded you up except that I want to ask a question here:).

Anyway, my question is simple - there's this line on my state taxes that asks me how much I paid in out-of-state goods over the past year so I can fork over sales tax on the items. My answer: I have no idea. Am I supposed to?

I was rather surprised to see this on my tax forms, since I don't recall being told any time that I should be saving receipts from out-of-state purchase. And while someone probably could look up my out-of-state purchases on my credit card, I don't have instant access to those records... Even if I did, I don't know what counts and what wouldn't. For example, some things aren't taxed in Massachusetts, like clothing.

I can't see how this will possibly work. I have no way of looking up this data - is it really my responsibility to keep track of my out-of-state purchases so the state can get their $5 or whatever? I don't make many purchases out of state anyway, and I definately don't bother keeping track of which purchases were made out of state and which were not.

It's tough to say how much you are supposed to pay, even if you *had* kept track of your Internet purchases.

I moved from a Maryland to Michigan in December 2003. If I were to count all of my Internet purchases for 2003 on my MI taxes (which requires the use tax) then, I would be paying for mostly MD purchases (which, to my knowledge, does not). So, just divide it up before and after, right?

Not that simple. Around the time I was moving, I was purchasing a lot of last minute things on the Internet. Many of which, I ordered in MD, but received in MI. Or, the transaction was initiated in MD, but by the time the money was transferred, I had already moved.

Don't taxes frustrate people enough without introducing state taxes like this?

Your naivite needs to be addressed, while I am not even a paranoid person, I can think of 2 ways where they can go after you:

1. Get all your credit card info. When was the last time when you used cash (money order, etc) for your Internet purchases? Do not kid yourself, the banks would happily submit your finincial transactions to IRS for audit at the first request...

2. Carnivore. Nobody know what it is capable of. Would be trivial to monitor all e-commerce transactions if needed. SSL is not that secure...

Realistically, there is not the slightest possibility of Carnivore or Echelon or something like that being used to monitor out-of-state sales tax. It wouldn't be cost-effective, even if states had their own NSAs.

In the short-run, as the article says, there's essentially zero compliance for existing law, and the only way anyone is getting into trouble is if the state is out to get them for something else. In the long run, Liselle is entirely correct. This burden is going to be imposed on Internet vendors, the way investment firms and banks are required to do the revenuers' work for them.

For the typical consumer this is a non-issue. The government is not going to go to extraordinary lengths to figure of if I owe tax on the $50 worth of Amazon stuff I bought. It just isn't economically worth it. Now if they had all financial information in the country in one place, they could theoretically figure this out (although given the government's record of technology use this is extremely unlikely), but that would raise significant privacy concerns.

Speaking of which, good luck if they wanted to collect. As the article
mentioned, the honor system doesn't work.

That's exactly the problem they had with the income tax--once people realized how much they were expected to fork over, they refused. The solution in that case was to take their money before they ever got it. Now, states have some real control over employers and retailers within their jurisdiction, but they can't do a whole lot outside of it. I can't see this being very effective.

Of course, it's also convenient to have a system where everyone is a criminal, because you can use that against them on a selective basis.

Apple has to charge sales tax in states where it has retail stores. IIRC most states require sales tax on mail/internet orders if the company has a brick and mortar presence in the state. I could be wrong though; IANAL applies.

There are people out there [givemeliberty.org] who say that there is no legal requirement to pay income tax to the federal government. I read last night about a guy that used to work for the IRS who resigned after doing his own research and coming to the conclusion that these people actually have a case. He hasn't filed a return since 1999.

How these people propose to fund the building of the roads that they will march on in protest is unclear, but it's an interesting case they put forward from a legal point of view.

The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States.

Amendment 16 of the US Constitution:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.

For a corporation, income is defined (more or less) as profit. In other words, company expenses are deducted from taxes. This is how multi-national corporations set up triangle trading schemes.

In case you aren't familiar with this tax-evasion technique, a corporation sets up a shell subsidiary (in name, an independent entity) is some place like the bahamas. The third part of the triangle is in the country that supplies the raw materials. Say I'm making shoes, and sell them for $100 a pair. Ordinarily that would mean a lot of profit for me, so to lower my apparent profit, I buy the raw materials for $90 from myself (the bahamas subsidiary). The bahamas subsidiary, however, bought the raw materials for $9, not $90, from somewhere in argentina. The US-registered corporation in fact makes a profit of $91 per pair of shoes (less labor and other expenses), but appears to have only made $10 profit per pair. The actual income is in the bahama shell, which has no obligation to pay US taxes.

How does this tie into income taxes? Well, ordinary people don't pay income taxes; they pay wage taxes, which are not the same. If I am allowed to deduct the cost of groceries, rent, gas, tuition, and healthcare, then I'll glad pay 30% tax on whatever's leftover.

If Article I, Section 8 allowed Congress to pass the income tax as it exists today, and create the IRS as it exists today, then please explain the necessity for the 16th Amendment. If Article I, Section 8 authorized the system we have in place, the 16th Amendment would never have been proposed, let alone ratified. Ratification of the 16th Amendment was also conditional on its being a temporary measure, as opposed to a cash cow for a massive Federal Totalitarianocracy.

You're also forgetting Article I, Section 2, which states:

"Representatives and direct taxes shall be apportioned among the several states which may be included within this union, according to their respective numbers..."[Emph Mine]

You're also forgetting Article I, Section 9, which states:

"No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken."[Emph Mine]

The Founding Fathers specifically stated in two seperate places that the Congress may not lay direct tax, except in proportion to the census. They couldn't have been more clear if they'd carved it into Jefferson's skull and stuck his head on a pike in the middle of Philly.

You could always argue that the 16th Amendment repealed these parts of the Constitution, but it does no such thing. Thankfully, the Supreme Court has already taken care of settling any dispute you and I might have about this. They did so in 1916, Brushaber v. Union Pacific R.R. Co., 240 US [1916], in which they held that the 16th Amendment did not alter Article 1, Sections 2 and 9, and that its only result is that the Income Tax remains an indirect tax. (Stanton v. Baltic Mining Co. , 240 US 112 [1916])

"So what?", you're probably saying. "They can still collect an indirect income tax." You're absolutely correct that Congress may impose an indirect income tax. Unfortunately for the IRS and personal income tax fans, the Supreme Court clearly defined an indirect tax in Flint v. Stone Tracy Co. , 200 US 107 [1911], in which it held that:

"Excises are taxes laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue certain occupations and upon corporate privileges; the requirement to pay such taxes involves the exercise of the privilege and if business is not done in the manner described no tax is payable . . . it is the privilege which is the subject of the tax and not the mere buying, selling or handling of goods."[Emph Mine]

Whoops, there it goes. You may find it hard to argue with that, but the Supreme Court would respectfully disagree. If someone has the money to take such a case all the way to the Supreme Court, we might all get a huge (as in 100%) refund from Uncle Sam in the next few years. The US Federal government was never intended to be the behemoth it currently is. Once we stop sending it all our money, we'll find that many other problems go away as well. It's tough to drop a billion dollars on a police-state inducing program (TIA, CAPPS/II, MATRIX) when your discretionary budget is smaller than a billion dollars.

If Article I, Section 8 allowed Congress to pass the income tax as it exists today, and create the IRS as it exists today, then please explain the necessity for the 16th Amendment.

If you'll wipe the spittle off your face, you'll note I quoted the 16th Amendment right below my quoting of Article I.

Ratification of the 16th Amendment was also conditional on its being a temporary measure, as opposed to a cash cow for a massive Federal Totalitarianocracy.

Doesn't change the fact that they decided to keep it, eh? Like it or not, it's a constitutional amendment.

The Founding Fathers specifically stated in two seperate places that the Congress may not lay direct tax, except in proportion to the census. They couldn't have been more clear if they'd carved it into Jefferson's skull and stuck his head on a pike in the middle of Philly.

The Founding Fathers also established an amendment process in Article V, permitting an overwhelming majority of Congress and the States to change the Constitution.

You could always argue that the 16th Amendment repealed these parts of the Constitution, but it does no such thing. Thankfully, the Supreme Court has already taken care of settling any dispute you and I might have about this. They did so in 1916, Brushaber v. Union Pacific R.R. Co., 240 US

From that decision:

"The Sixteenth Amendment as obviously intended to simplify the situation and make clear the limitations on the taxing power of Congress and not to create radical and destructive changes in our constitutional system.

The Sixteenth Amendment does not purport to confer power to levy income taxes in a generic sense, as that authority was already possessed, or to limit and distinguish between one kind of income tax and another; but its purpose is to relieve all income taxes when imposed from apportionment from consideration of the source whence the income is derived.

The Income Tax provisions of the Tariff Act of 1913 are not unconstitutional by reason of retroactive operation, the period covered not extending prior to the time when the Amendment was operative; nor are those provisions unconstitutional under the due process provision of the Fifth Amendment; nor do they deny due process of law, nor equal protection of the law by reason of the classifications therein of things of persons subject to the tax."

Whoops, there it goes. You may find it hard to argue with that, but the Supreme Court would respectfully disagree. If someone has the money to take such a case all the way to the Supreme Court, we might all get a huge (as in 100%) refund from Uncle Sam in the next few years.

Knoblauch v. Commissioner, 749 F2d, 200, 201 (5th Cir. 1984), cert. denied, 474 U.S. 830 (1986) in which the court described the argument that the 16th Amendment was not properly ratified as being "totally without merit."

United States v. Foster, 789 F.2d 457 (7th Cir.), cert denied, 479 U.S. 883 (1986) in which the Court affirmed Foster's conviction for tax evasion, rejecting his claim that the Sixteenth Amendment was never ratified.

United States v. Stahl, 792 F.2d 1438, 1441 (9th Cir. 1986), cert denied 479 U.S. 1036 (1987) in which the Court states: " . . . that the sixteenth amendment has been ratified . . . is conclusive upon the Courts" and upheld Stahl's conviction for failure to file and making a false statement.

Miller v. United States, 868 F2d 236, 241 (7th Cir. 1989) (per curiam) in which the Court said, "We find it hard to understand why the long and unbroken line of cases upholding the Constitutionality of the Sixteenth Amendment . . . have not persuaded Miller and his compatriots to seek a more effective forum for airing their attack on the federal income tax structure." The Court labeled their position "patently frivolous" and levied sanctions against them.

"That is really just an academic question though - you've got to play the cards your dealt, and we've got to deal with the federal income tax system, as much as it sucks."

This would be true if we lived in a totalitarian regime. We, however, live in a representative republic governed by principles, the Constitution, and the rule of law. Thus, one is quite welcome to challenge or attempt to change laws with which they disagree. This can be accomplished via court action, congressional lobbying, or state-init

I fail to see how this is the case, unless you're a fan of big government and a socialist state. If you'd like to send all your money to the Federal government in the hopes that it'll provide for your every need, feel free. Personally, I see the Federal government as an out-of-control, digustingly large, billions-bleeding behemoth hell-bent on making itself as powerful and omnipresent as possible. The original intent of the Federal government was to act as a sort of UN for the several states. In cases where states might fight over an issue, the Federal government was given the authority (enumerated powers) to ensure relations between the states remained as civil as possible. Thanks to Lincoln, amoung others, we've obliterated any semblence of states' rights, fiscal discipline, personal responsibility, or adherence to the intent of the Constitution.

The Constitution is hardly a practical document. It rarely delves into details, and largely prefers to state a general idea or principle. It does this because it is a statement of principles. It describes an ideal state in which power is always balanced, poor leadership by a few is irrelevant, extremism can be nullified, and where the people truly are the ultimate authority. The system we have now shows that with 200 years, a fist-full of wars, and a willingness to bludgeon the masses with extreme and misleading concepts repeatedly, you can pervert even the most beautiful government.

They certainly do, and the Constitution provides the means for legal taxation to ensure the government has all the money it needs. If the government has grown to such a size that it can no longer sustain itself via legal means, the solution should not be to throw more money at it, nor extract money from citizens by threat of imprisonment. The reason the government is as large as it is is because it has usurped authority and responsibilities from

How these people propose to fund the building of the roads that they will march on in protest is unclear

The same way roads were funded up until 1913 (when Amendment XVI was passed allowing an income tax) - excise taxes, tariffs, and salex taxes. Roads of course should be funded by states, and not all states have an income tax - mine only (with a few exceptions) has a sales tax, which is the whole point of these laws.

E.G. they weren't. Until that point, most roads in this country were unpaved disasters, generally two-land roads. Imagine driving from Boston to Washington DC on all local streets and country roads. It wasn't until the advent of federal taxation and the grants that went along with it that enough resources could be mustered to build large highways (starting with New York State in the 20's thanks to the work of everyone's favorite megalomaniac, Robert Moses).

And don't kid yourselves - parasite states like Delaware (my own) which have low/no income tax, or no sales tax, find ways of compensating for the lack of money. Delaware, for instance, poaches its section of I-95 mercilessly, charging outrageous tolls which cause miles-long backups on the interstate while doing virtually nothing to actually improve the quality of that road - all of the toll money goes to local road construction. Or, another Delaware invention, they attract huge corporations to the state so they can earn incorporation fees, thus earning several thousand dollars for themselves while depriving the original homes of those companies of millions of corporate tax dollars. If you're paying Paul, you've got to screw Peter somewhere.

In the big PDF file, 1/2 of their argument (people are not corporations) falls apart on the first page. They assert that ("United States" => federal corporation) => (person => ~federal corporation) because person is not "United States". Could you make a more basic logical error? If X then Y does not mean if !X then !Y.

The other half of their argument is that federal law specifies income tax but does not specify that a person is liable for paying that income tax. Even if they are right about that

Taxachusetts counts. There seems to be a big push to pay use taxes on items not purchased in-state. As I recall there is even a box this year on the income tax form to declare these unpaid taxes.
Also remember that Mass. has invested heavily in a new system to catch tax cheats.
From the Boston Globe Archives:"
STATE'S NEW TECHNOLOGY GATHERS INFORMATION TO FIND TAX CHEATS
Published on February 15, 2004
Author(s): Bruce Mohl, Globe Staff
If you get the urge to fudge a bit on your taxes this year becau

Ohio is one, but then again it was on *last* years form as well. In Ohio at least it's just application of the use tax laws that have been on the books forever to a new area which the states fear could significantly impact revenues. In other words they are just pointing out that you need to report this new area just like you always were, of course from a bit of old research it seems that use taxes were never a big source of revenue due to their inherint unenforcability.

I am an accountant who is currently preparing tax returns for several states and has had to deal with this. Here is a list of the states that collect sales taxes for out-of-state purchases through income tax forms.

However, even though all these states have places to report this tax, in almost every case my firm just puts in a zero. Granted this policy may change if states become more active with enforcement, but that is our current policy. Just don't blame me if you put 0 and get audited.

The "honor system" doesn't apply here, because no one has agreed to pay sales tax on out of state purchases. If we had agreed as a nation or as individual states to report our online purchases, we would be on the honor system.

If we refuse to comply with unreasonable demands for money from the state, we are not on the "honor system" as far as our obligations are concerned.

Your credit card statements wouldn't be enough. For example, IIRCshipping charges are exempt (at least in some places). Also, someon-line retailers already charge the appropriate sales tax (companiesthat already have a presence in your state are supposed to track andcharge sales tax, and I know at least some do).

Hmmm... I live in Nevada and I'm wondering how this works. The article says that all states have use tax, but it is collected on the state income tax form. What does a fine upstanding citizen, in states like Nevada where there is no income tax, do to report tax on his online purchases?

Hmmm... I live in Nevada and I'm wondering how this works. The article says that all states have use tax, but it is collected on the state income tax form. What does a fine upstanding citizen, in states like Nevada where there is no income tax

And from all of us degenerate gamblers who pay your taxes for you, you're welcome.

I remember hearing a governor say that at some point, it's going to come down to having his highway patrol stop all the little brown (United Parcel Service) trucks and see where the stuff is from and where it's going.

Now if that wouldn't be a violation of the Commerce Clause, nothing would be.

This would be hard for me, considering I kept little record of online purchases over the past year. If it's a used item is it supposed to be
taxed, too? What about all those books I bought from amazon.co.uk? (More of these on the way.) I'd rather online retailers just do the work for me. Then it's their problem if they try to cheat
one state government or the other. (i.e. i report I bought $2,000 worth of computer hardware from a business, which collect sales taxes, but didn't actually turn them over.

That line has been on my tax return for as long as I can remember. Of course when I first started doing taxes we didn't have internet sales, and it was intended to only apply to mail order stuff. I don't know anyone who put anything in that line back then, and I don't see any reason to expect that to change now that internet sales should be added in as well.

I'm curious, what part of Article 1 Section 8 of the U.S. Constitution don't these boneheads understand?

I know the states get around this by calling it a "use tax", but come on. Do you really expect me to keep track of everything I've bought across state lines just because you charge so much sales tax that the price of shipping makes up for the difference?

I've moved into Florida a couple of times. They used to ding you a $600 "Impact Fee" when you registered your out-of-state car in the state. Someone sued the state claiming that the impact fee was unconstitutional because it was not applied to everyone equally (State residents didn't pay it.) So I got a nice refund check back from the state after they won.

Florida also has a use tax and used to run extremely obnoxious commercials telling people that they were required to pay it if they purchased items outside the state.

I would think that a "use tax" that is applied only to people who make purchases outside the state would be attackable as an unconstitutional attempt to regulate interstate trade. You're applying a special piece of state income tax code to a class of people that isn't everyone. Since that class of people is only people who have made out of state purcahses, how can it not be an attempt to regulate interstate trade. It will certainly have that effect.

I would think that a far more legally solid method of applying taxes would be to tax a business in a specific state for any sale it makes, whether the sale was in-state or not. Of course, no mail order shop would ever set up shop in a state that did that...

As a brick & mortar retailer, I'm sick and tired of losing businesses to cheapskates who want to shave a few pennies off, and don't give a damn about the businesses they choose to support or not to support. I say that that's the price you pay for shopping online (along with not being able to see the product, not know who you're buying it from, shipping cost and time... etc) It's about time that the playing field is leveled. Personally, I can't wait until this country turns into nothing but a bunch of

If I walk to a retailer and buy something, I pay sales tax -- but no shipping and handling. If I order something online, I pay no sales tax -- but I do pay shipping and handling.

Six of one, half a dozen of the other. The reality is that warehouses have a lower per unit cost structure due to effeciencies, but have to pay to ship. When one cost is lower than the other, blammo. I think you'll find that most people who purchase new items online don't do it to save a "few pennies." They either do it to save tens of dollars, because they can't purchase the item locally anyway, or as a convenience.

In short, compete to offer your customers the lowest price/best service combination, or just STFU. The community will be better off either way.

My point is that it's expensive as fuck to run a retail outfit, and consumers take that for granted. Hell, it's already happened with books. So many jackasses buy books online that you can't find a decent bookstore in real life. No such thing as hanging out at the bookstore, browsing, hitting on chicks, talking about books, etc. It's all plugged into the little glowing box, now, unless you want to go to one of the few remaining big box retailers. I don't know about you, but I sure as shit miss bookstor

Hell, in 20 years, Amazon will control most of the book market in this country, and if they dont' have it, you're fucked.

LOL... sure, whatever.

Suppose Big-Chain-Store stops carrying X. That's when a small shop opens up and starts carrying X. The only way BCS can keep the little guys out of the market is to continue to sell everything they can.

Look at Netflix. They're taking over the rental market by storm. However, they won't shut out all the stores... because they don't carry porn. As long as they don't carry porn, there will be an independent that does. Sure, those indies might have to charge much more, but as long as there is a demand, as long as BCS doesn't carry the product, there will be room for independent retailers.

Yeah, there's no way to directly compete with BCS... that's what small mom-n-pop stores have slowly learned. You can't compete on price, but you can compete on service, convenience, and maybe even selection.

In no way am I asking for protection or not adapting. I do what I have to to pay the bills. I *am* adapting (and thriving). My point is that in the grand scheme of things, if consumers continue to not think about where their money goes, we're gonna be left with a country where the only variety left is how the Starbucks are decorated. If anything, I'm not *just* complaining about anything. I'm fighting back (and winning, at least in my town).

You talk as if it's the end of the world. So what if all the brick-and-mortar businesses go out of business? If that what the market dictates so be it. In a few years people will yearn for brick-and-mortar again and we'll have a brick-and-mortar bubble.

But who cares? We'll get what we ask for as a whole. If what we get sucks and enough people agree that it sucks, we'll start asking for something different and it will be provided by the market.

If you think running a brick-and-mortar shop is bad take a look at the restaurant business. For decades restaurant closure/failure rates have been hideous. You've don't have much to complain about IMHO.

It's just that what the market dictating sucks. That's like saying "Let the market dictate what OS is the best. There's no need to advocate for OSS". Same thing. I *know* that without small towns, real shopping, human interaction, etc. all you get are Wal-Marts, and again, if you've ever been to a small southern town, it's incredibly depressing, and there's virtually no difference between them. So I guess that what I'm pissed about is that people do what's best for them, right now, right this second, w

So then all the local governments that have been earning their revenue from sales taxes will either have to switch to another (e.g. income or property) tax type, or they'll have to start enforcing these use taxes.

Either way, a huge disadvantage of brick-and-mortar businesses will have been eliminated, and so they will start to come back, putting some of the internet sellers out of business in turn. It may all work out alright in the end, but if we try to eliminate inequitable taxes in the first place perhaps we can make the process of approaching that end less unpleasant.

If what we get sucks and enough people agree that it sucks, we'll start asking for something different and it will be provided by the market.

Being able to dodge taxes isn't a market efficiency, it's an externalized cost. Governments which depend on sales tax aren't just going to close up shop when those revenues go down, they're going to get their money somewhere else instead.

Okay... to the brick-and-mortar retailer... shaving pennies off is one thing. The average online purchase of electronics, in my experience, is 30-50% less than it costs to buy the same products locally, even before sales tax comes into play. There are exceptions, but they are very rare, and usually involve a "special sale" at the local retailer.

Put another way, many frequent online buyers shave a few hundred thousand pennies a year. The only thing a use tax will do for you is make people purchase fewer products (which hurts the economy, and, indirectly, your business). It certainly won't drive them to buy things locally. If anything, it will mean that they will have less money left over to spend locally, hurting the local economy even further.

As for the disappearance of local retailers, I'm all for it. Some things make sense to have available locally. Wal-Mart SuperCenters and Big K-Marts sell most of them (day-to-day needs, groceries, etc.). Home Depot and Lowes pretty much take care of the rest. Almost everything else can generally wait a couple of days. I guess cars and furniture are, to some extent, also exceptions, just for the ability to browse, though it's not -that- important....

That having been said, if you want to compete, start by forming buying groups with other companies to increase your buying power (thus lowering prices). Scale back your selection to include only things that you can sell at a reasonable price rather than wasting space with things that you'll get stuck with. When your prices are within 5% of the online prices, it will frequently be worth it to buy something locally for the convenience, even with sales tax. As long as someone can cut the price in half by buying online, though, you're pretty much screwed.

I do give a damn. I gladly pay more in a store that has well paid, intelligent, and honest salespeople. As it is, usually I hate the shopping experience in many (but not all stores). You are lied to, or you cannot get served, or you can't find what you want, or things are stocked so that everyone trips over each other and the merch.

But there are stores that manage to keep me coming back and spending more. How? These stores are pleasant, well organized and well stocked, and the sales help and cashiers are helpful and fast. If you can't pull all this off, then don't be surprised that us "cheapskates" don't seen any reason to pay more at your store.

The tax issue is only one of a zillion factors why many of us have moved a lot of our purchasing online.

If there's one thing I've learnt about government, it's far better to fight for pardon than to for ask permission. How do you know how far you can go, if you never even bother to test the waters. It reminds me of those movies where everybody was afraid not to cower to local bully, but if they all did they would all have been better off.

Anti-tax wingnuts amaze me, because they seem to think that nothing they use is touched by the government, when in reality, government is responsible for the vast majority of the things that make life for most people livable, and not s

NC has an interesting take on this; they have a line item for net purchases where no sales tax is paid. They also, however, have a handy way for you to estimate what you should pay if you don't know how much you bought online; they simply have you multiply your adjusted income by the state tax rate of 7% (7.5% if you live in Mecklenburg County, as I do).

Now, this galls me on several levels. One, they assume that every penny you earn is to be spent on sales-taxable goods in the Great State of North Carolina. Two, you definitely get the feeling that if you don't put some amount on the line, they'll be pulling your return for audit. It's almost a big brotherish attempt at coercing additional tax monies. Furthermore, if you buy something in say, SC, with a sales tax of 5%, they expect you to pay the difference between that rate and your rate.

So what if I'm a Taxachusetts's resident, who typically pays 5% sales tax. I visit California, see a great buy on a laptop at Fry's and pay the 8.5% sales tax.. Do I get a credit for the 3.5% of say $2000? (I want my $70!) I doubt it...

Here in N.H. there is no sales tax. I often forget that other states even have sales tax. It seems I am only reminded when I am on vacation, and the clerk wants me to pay $10.55 for the item that is clearly marked at $10.00. Then I get this dumb look from the poor person behind the register, "Uh, sales tax?"

It makes me wonder, how our state can run without sales tax, and without state income tax. I mean, it's a wonder we survive at all! Now, look at Mass, and California, loads of taxes! Boy, those people sure are better off with all those taxes and government programs! But, I digress.

Seriously, if you live in NH, and you buy goods over the Internet, no tax, case closed, Live Free or Die!

Does your state have property tax? It is possible that your property tax is far higher than it is in California. And in California, property taxes do not increase when the value of your property increases. This creates a situation where the state isn't getting nearly as much money from property taxes as other states. And what about car registration? In California, registration is much lower than in other states. So watch out for all of those taxes you are taking for granted!

New Hampshire has lots of ski resorts. The restaurants and hotels of the state end up paying resort and meal taxes, and all the visitors to these ski resorts (in a good year they come from Europe!) end up paying a LOT of taxes. In addition, the state operates the only liquor stores and tolls certain highways.

Car registration is much lower in California?? Perhaps I misunderstand what you're talking about, but the "registration fee" is about the same as in most other states (~$30), but then they tack on the "vehicle license fee", which is insanely high depending on the year of your car. Every freaking year, in order to renew your registration, you have to pay both the registration fee and the vehicle license fee. Before Arnold rolled back Gray Davis's TRIPLING of the previous fee (which was already very high r

Not such a bad system, honestly, but I don't think your assessment is fair since New Hampshire has no real urban areas or blight to deal with and just doesn't need a lot of the infrastructure that a "real" state (one with a more substantive population) requires.

You know...one really has to wonder.

The idea of urban areas is that they're more efficient. You can centralize and reduce transportation costs. New Hampshire lacks those, so presumably is under even tougher constraints.

No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another.

One state cannot tax a purchase made in another state. Taxes are too high as it is.

I'm not so sure about that. The first part, "No Tax or Duty shall be laid on Articles exported from any State." covers exports. Meaning, if I am the government of New Jersey, I cannot tax products being exported to New York. However, it does not stop New York for taxing imports from New Jersey. Such import taxes have been used many, many times since the founding of our nation.

You can't use that justification (see my comment here [slashdot.org]), but you can cite section ten:

Article I, Section Ten:Section 10. No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.

No state shall, without the consent of the Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing it's inspection laws: and the net produce of all duties and imposts, laid by any state on imports or exports, shall be for the use of the treasury of the United States; and all such laws shall be subject to the revision and control of the Congress.

Yeah, I've got a whole team of detectives on it. We're working in shifts.

The only way to enforce laws like this is to effectively remove any expectation of privacy from every Internet transaction. That's going to be very difficult.

A smarter way would be to have a smarter tax system, like a Value-Added Tax. Tacking sales tax on as an after-thought is stupid, and creates many more problems than it solves. With a fairly simple system (Person A hands a stack of bills to Entity B; B hands A a Widget; B makes an entry in a book) its worst flaws aren't really exposed. With side-spread digital transactions for digital goods it simply cannot be maintained.

Many of you seem to be wondering which states this affects. Well, according to an article [slashdot.org] posted last month on SlashDot. The following states are collecting Internet taxes:

States with sales tax lines on their tax forms include Alabama, California, Connecticut, Idaho, Indiana, Kentucky, Louisiana, Maine, Massachusetts, Michigan, New Jersey, New York, North Carolina, Ohio, Rhode Island, South Carolina, Utah, Vermont, Virginia and Wisconsin, according to the Federation of Tax Administrators.

since I run an on-line business in AZ, telling me to report any internet purchases I had made. I thought about it for a minute and then realized of the two known internet purchases one had been refunded entirely by the company (NewEgg, which resulted in me getting a server case for free after they jerked me around for several months) and the other was less than $100 and had just taken place a couple days prior. It's actually pretty rare that I buy things on-line and I don't keep records unless it's a purchase for the business since it's a tax write-off. The only purchase I could report was a business expense.

The tax only applies if you purchase tangible goods and import them into your state of residence. It falls under a "Use Tax."

If you're not running a business you most likely will not be bothered. I was probably sent a letter not only because I run a business but also because I don't pay any taxes on sales since they're all internet based and out of state. Every month I have sales to report but no tax. It also may have raised a flag.

States have no right to tax interstate commerce, buying something out of state is interstate commerce and constitution clearly states that states have no right to levy tariffs or taxes on interstate commerce.

So if I eat dinner in a restaurant across the state line in a state that doesn't collect sales tax, and drive home, do I owe on the partially digested remains in my stomach? If so, how do I calculate the amount owed since evidently at least part of the food was used out of state?

I never knew about the use tax. I thought it applied to huge items like automobiles but not to anything else.

Then on this year's form I saw the Dreaded Line. I thought about it for a long time. I have always carefully avoided Web sites that charge taxes. But in the end I just paid the tax, for a combination of reasons:

It just wasn't all that much money.

I can't bring myself to defend the idea that my local businesses deserve to get screwed by the tax system.

I'm not some damned Randite, so I'm not about to go on a one-man idealistic crusade against taxes. I like roads, schools and libraries.

I couldn't come up with a plausible lie.

Shamefully, I did contemplate lying. But how? I mean, it's nuts to write in "zero". When your auditor asks "why zero - haven't you ever bought anything from Amazon?" what am I gonna say? "No, I live in a cave and all my books are handwritten on vellum?"

I could claim that I didn't know what I had spent. Unfortunately, I save my credit card bills, since I want to have some evidence on my side after my identity gets stolen. Even more unfortunately, I own Quicken, which can print out all my interstate transactions for the year in, like, three minutes. Oops. So not only is ignorance not a legal defense, it isn't even a believeable defense.

I thought about only paying the tax on the big-ticket items. But the difference between that and just paying everything I knew about was, say, $15. It's worth $15 to be able to go before my auditors and NOT lie.

And there are karmic benefits. I no longer refuse to walk into my local stores because I know I can pay lower taxes on the Internet, even after shipping. Instead I refuse to walk into my local stores because they charge $25 for a book that Amazon is selling for $18. I mean, I know I am supposed to support my local stores, but $7 per book?

... and bless New Hampshire too for not having sales tax or income tax.

After doing 3 years worth of work on a project under the direction of the State of Maine, a few things became very apparent to me. State governments are very inefficient -- and thus it takes more money each year to accomplish the same thing. Combine the general inefficiency with new government programs every year, and you'll quickly see that with a few exceptions, your state is likely out of control.

A friend of mine who's done use tax stuff for banks says that putting a "0" on that line is better than leaving it blank. If you put a "0", you have made a declaration that you don't owe any use tax, which might very well be true. If you put nothing, you haven't filled the form out properly, which is a Bad Thing.

Then your friend has no idea what he is talking about. Non-applicable lines on tax return forms are usually left blank instead of being filled with zeroes. My frickin' tax software leaves such lines blank, so I fail to believe that it's a big audit trigger.